Cash Out Refinance is a simple concept: you get a new, higher mortgage on your home, use part of the money to pay down the existing mortgage, and “cash out” the difference. 

For example, you have a home worth $300K, and you have $100K in outstanding mortgage balance; you could get a new mortgage for $200K, pay back the $100K, and keep the remaining $100K. 

Interest rates are typically fixed, lower than alternatives, and you would start paying back immediately principal and interest in equal monthly payments. Closing costs are high, and qualification requirements are strict, which may make harder for older adults to qualify. These requirements vary by lender, but typically the maximum CLTV is 80%,  maximum DTI is 43%, and good credit is required. If you are wondering what DTI and CLTV are, we have a simple glossary here. Homeowners remain responsible for paying real estate taxes, insurance and maintenance on your home. Interest rates can be tax deductible. 

Cash Out Refinance
Cash Amount Typically up to 80% CLTV
Cash Payout Design Upfront lump sum
Repayment Profile Fixed monthly payments including principal and interest
Taxes, Insurance & Maintinance Responsibility of the borrower
Transaction costs Varies; typically high

What to Consider

If you need to access a large amount of cash right now,  have enough income to pay the loan back comfortably, and interest rates are currently low, Cash out Refinance could be a good solution.

Examples can be use proceeds for large unexpected repairs or medical bills, while lowering the interest paid on your mortgage. However, it's key to have enough income to safely support the higher debt payment going forward; defaulting on the debt would put you at risk of losing your home. It may be difficult for older adults to qualify because of strict requirements.

Cash Out Refinance
Best Fit When Cash needs are a one-off issue (e.g., a home renovation or large health expense) and income is sufficient to repay the debt.
Considerations It can be harder to qualify for many older adults (DTI < 43%, good credit), debt needs to be repaid.